The trend of low prices is sweeping across the globe.
Europe is affected by an economic downturn, while the United States is plagued by high inflation. This forces billions of consumers to search for low-priced and high-quality products. Backed by China's vast manufacturing capabilities, cross-border e-commerce platforms Temu and Shein are riding the wave of the tide, challenging Amazon's previously dominant position.
Amazon recently opened the Amazon Haul port on its mobile platform, selling products priced at $20 or less. This is one of Amazon's measures to confront Temu and Shein. From a manufacturing perspective, Amazon has chosen the Pearl River Delta as the starting point for its counterattack, with Dongguan being the core hub.
Chasing the trend of low prices
Last year, we had products with a gross profit margin of about 30%, but this year the average should be less than 20%, "said the head of a horticultural product company to First Financial.
This company's products are sold from cross-border e-commerce platforms to North America and Europe, entering the courtyards of local consumers. The trend he observed is that consumers have become increasingly sensitive to prices after the pandemic. Although the company has developed new products, its sales performance has not met expectations. Our goals for this year were not particularly ideal
A photography accessories company headquartered in Shenzhen told First Financial that during the period of 2022-2023, after the lifting of global travel restrictions, the company's sales in the US market also experienced a rapid growth. But starting this year, with the intensification of industry competition, the continuous emergence of more and more innovative products in segmented imaging, and the sustained downturn in the global consumer market, this company's business has also been significantly affected.
The message conveyed by consumers to sellers and Amazon is that they do not need certain products to be delivered quickly, but are willing to wait for a long time to get a lower price.
From the perspective of consumer demand, under the influence of the global economy, customers from any channel hope to get better prices, "said Dai Hongfei, Vice President of Amazon Global Store Opening at the Amazon Global Cross border Summit on December 9th, to First Financial reporters. So, we also hope to expand the categories of services and the customers we serve, which is why we launched Amazon Haul
The types of products sold by Amazon Haul in the early days included clothing, home furnishings, and daily necessities. The prices of products on Amazon Haul are all $20 or below, with the vast majority of products priced below $10. This is significantly different from Amazon's traditional approach.
Amazon was born in the United States and targets consumers in developed economies such as the United States, Japan, and Europe. Now Chinese sellers can sell to 20 countries through Amazon, reaching hundreds of millions of users on the platform, and the product premium is relatively high. Therefore, Amazon is often seen by sellers as an opportunity to build their own brand. Many Chinese companies started from Amazon and have achieved billions or even billions of dollars in business every year. Even companies such as Zhiou Technology and Anke Innovation have already gone public.
In the past year, the number of products sold by Chinese sellers on Amazon has increased by over 20% year-on-year. Chinese brand sellers are growing faster, with sales on Amazon increasing by nearly 30% year-on-year in 2024. In the past two years, the number of Chinese sellers with sales exceeding $1 million has increased by nearly 55%.
The launch of Amazon Haul caters to a global trend of demand for low-priced products.
During periods of high inflation in the United States or sluggish economic growth in Europe, even people in developed economies may feel that their dollars or euros have become "hairy" in their pockets. There are hundreds of millions of high spending consumers in the United States and Europe, and now they also hope that every dollar is worth it. Many people are calling for more and cheaper daily necessities.
If it is an urgently needed medication, buyers may be willing to pay a higher price to achieve same day delivery; If it's the second wok in the kitchen, shoppers often don't mind waiting longer. Amazon Haul currently only has a site for sellers to access the US market, and the products sold usually take one or two weeks to reach buyers.
The global trend of low prices has already achieved Temu and Shein.
Temu is a cross-border e-commerce business under Pinduoduo, while Shein is a fast fashion e-commerce enterprise. These two companies are developing rapidly in the US and even the global market, which has had a certain impact on Amazon.
Temu's success in the United States has proven that a large number of Chinese sellers can now abandon their brand demands and seek shipment volume. Temu chose the United States as its first destination for overseas travel and has now expanded to dozens of countries, but the largest source of revenue is still the United States.
Temu's slogan in the United States is to encourage ordinary people to "shop like billionaires". The premise for achieving this goal is that China, as the world's factory, continuously provides products with basic quality assurance and low prices from energy sources.
Shein, headquartered in Guangzhou, China, has captured American consumers through fast fashion and is currently the core e-commerce channel for American consumers to purchase clothing. Lower prices and faster update speeds are its core competitive advantages. At present, the company has been tight lipped about when and where it will go public.
In the more than 40 years since China's reform and opening-up, a large number of enterprises have transformed from contract manufacturing to brand manufacturers, and well-known brands have appeared on the world stage in the fields of clothing, instruments, mobile phones, etc. But the ecology of Chinese manufacturing is vast and dense, with thousands or tens of thousands of small and medium-sized factories and intermediary traders having certain strength, but they are also unknown.
Chinese sellers have also developed very well in many high priced categories, such as furniture, lawns and gardens, sports, and other categories. This depends on the seller's positioning of their own brand or development, "said Dai Hongfei." Chinese sellers have a very different development process. For some small and medium-sized factories, they may not be able to directly reach the step of building a brand on the first day. Some sellers who focus on low priced products can enter this track through their price advantages and gradually grow into a brand
Why Dongguan
Amazon has selected some companies to participate in the early internal testing of Haul, in order to run the links of uploading product information, consumer ordering, payment, and logistics.
According to Dai Hongfei, these sellers were roughly selected based on three principles. Firstly, they are existing sellers on Amazon and have already collaborated with us. Secondly, they have cost and price advantages, as well as the categories we want to list. Thirdly, they are able to ship goods to our operations center in Dongguan and can accept our initial testing period. There are some processes that need continuous improvement and optimization
So far, Amazon has set up local teams in 12 cities in China for its global stores. However, Amazon has not invested in logistics or warehousing infrastructure in China and has also leased third-party logistics facilities in Dongguan. What are Amazon's considerations for choosing Dongguan as a gathering partner and a base to counterattack "friendly merchants"?
The transportation there is very developed, and the Amazon logistics team also has some layout there. Therefore, choosing Dongguan is a natural place. Whether we will do other (operation centers) in the future depends on the situation, "said Dai Hongfei.
A developed logistics system is a necessary rather than sufficient condition for Dongguan to be selected. When it comes to logistics systems, cities such as Shanghai in the Yangtze River Delta are also developed. The manufacturing ecology of Shenzhen, Guangzhou, and the entire Pearl River Delta surrounding Dongguan may be a more important factor. There are numerous sellers and factories in Dongguan that have already shipped from Amazon.
Shenzhen and the Pearl River Delta have the highest concentration of Amazon sellers. According to the reporter's understanding, about one-third of Chinese sellers on Amazon come from Shenzhen, and nearly half come from Guangdong Province.
Taking consumer electronics as an example, Guangdong's industrial ecosystem integrity and competitiveness are far from comparable to other regions in China. The Consumer Electronics Show held annually in Las Vegas, USA, has the highest number of exhibitors in the world in Shenzhen.
The above-mentioned photography accessory company told First Financial that its production bases are located in Shenzhen and Dongguan. "The company's products are mainly aimed at image content creators, and the unit price of the products belongs to the upper middle level. Therefore, the main e-commerce platform is still Amazon
Shenzhen has advantages in the digital and furniture industries, while Guangzhou has clusters of industries such as clothing, beauty, and home furnishings. These categories can be said to be important categories in e-commerce. A complete ecosystem means faster response times, stronger innovation capabilities, and the lowest costs and prices.
Temu and Shein are direct competitors to Amazon in the United States in the fields of cost-effective consumer electronics, household products, and more. These two companies originated in China, with Shein's headquarters in Panyu, Guangzhou and Temu deploying a large number of personnel in Shenzhen. The competition among e-commerce platforms around these categories is sometimes fierce.
Previously, Shein and Temu had engaged in multiple rounds of fierce battles over fashion apparel, and sued each other in US courts for infringement or monopoly. The introduction of Amazon Haul has intensified the competition for low-priced e-commerce channels between China and the United States.
Prior to this, Amazon had already adopted some low price strategies, such as reducing commissions for clothing categories. Low price and high turnover women's clothing is Shein's starting and main category, and the United States is also Shein's main source of income.
At its global cross-border store opening summit, Amazon announced the opening of supply chain intelligent hosting services to Chinese sellers, covering core processes such as picking up goods from Chinese factories, domestic transportation, inventory integration, customs clearance, cross-border transportation, overseas warehousing, intelligent inventory management, automatic replenishment and inventory optimization, and last mile delivery. The similar full process custody business is an important reason for the great success of Pinduoduo Temu.
For fully or semi custodial models, some companies vigorously embrace them, while others have concerns. The above-mentioned photography accessory companies stated that this type of model is not very attractive to them because "the company started from overseas markets and after years of development, has a mature system for operating overseas e-commerce platforms. The fully or semi managed model is more suitable for small and medium-sized sellers who are just starting out
Amazon Haul is just starting out, and there are many internal learning and optimization processes in this process, "said Dai Hongfei. We hope that Chinese companies can build global brands, so choosing multiple channels is also a normal development process for them